BP Deliberately ‘Underpaying’ Claims, Mississippi Says

BP Plc is using the $20 billion fund run by Kenneth Feinberg to stall payment of interim damage claims and pressure “financially desperate” oil-spill victims into accepting quick, cheap settlements that block them from suing later on, Mississippi’s attorney general said.

Mississippi Attorney General Jim Hood said he analyzed data from the website ofFeinberg’s Gulf Coast Claims Facility and found that “virtually no interim claims are being processed.” More than 95 percent of requests for rapid, “seemingly very low” final settlements have been paid promptly, Hood said in papers filed today in federal court in New Orleans.

“This scheme is yet another device for BP,” through the Feinberg fund, “to entice claimants to sign a release and to improperly leverage those releases by intentionally underpaying interim claims,” Hood said in a motion urging U.S. District Judge Carl Barbier to supervise Feinberg. “BP is withholding all interim claim payments to increase the financial hardship on claimants.”

Hood, along with four other Gulf Coast state attorneys general, has asked Barbier to oversee Feinberg’s claims payment facility, which spill-victims’ lawyers have attacked as London- based BP’s “alter ego.” Barbier is in charge of hundreds of consolidated economic and personal injury lawsuits seeking damages from the worst offshore oil spill in U.S. history, caused by the Deepwater Horizon explosion in April.

Interim Payments

Daren Beaudo, a BP spokesman, declined to comment until the company had the opportunity to review the court filing.

Feinberg didn’t immediately return a call or e-mail requesting comment.

Of the 32,691 requests by individuals for interim damage payments from Feinberg’s fund, “none have been paid” as of Jan. 29, Hood said. Of 9,464 businesses that have filed interim damage claims, “only one has been paid,” he said.

By contrast, 81,933 of 85,741 claimants who have submitted quick-pay claims, which offer victims immediate cash if they’ll agree never to sue BP or other spill-related companies, have been paid, Hood said. Individuals are paid $5,000 and businesses $25,000 under Feinberg’s quick-pay system, which doesn’t require documentation of losses.

“The number of claims that have been summarily denied is also striking,” Hood said.

Individual Claims

Feinberg has denied about two-thirds of all individual claims and 44 percent of all business claims for emergency aid payments submitted since the spill. Hood said it’s “impossible” to determine why these claims were denied. BP told the court that “more than half” of denials are for failure to provide documentation of loss, he said.

Feinberg “likes to recite” how much his fund has paid out collectively for all damages “because in the aggregate these are very large sums that have been paid,” Hood said. Through Jan. 29, the Gulf Coast Claims facility has paid almost $1.4 billion to individuals and $1.9 billion to businesses damaged by the spill.

“But when viewed on an individual basis, the sums paid are only remarkable for how seemingly paltry they have been,” he said.

The average individual claim paid so far is $8,574, while the average business claim is about $33,727, Hood said.

“Assuming that these figures represent payment for six months’ worth of losses, the average individual was paid $1,429 per month, and the average business was paid $5,621 per month,” Hood said in today’s filing. “These numbers seem quite low, considering the unprecedented magnitude of the economic hardship and loss that has resulted from the Deepwater Horizon disaster.”

Louisiana Claimants

The Feinberg fund may be shortchanging Louisiana claimants, the state’s governor and attorney general said in a separate filing today.

Florida has more claims paid than Louisiana, which was ground zero of the oil spill,” Governor Bobby Jindal and Attorney General Buddy Caldwell said in court papers seeking oversight of the fund by Barbier.

“While the state supports Mr. Feinberg’s efforts, the state must ensure that BP’s desire for quick resolution does not trump the right to a fair proceeding,” they said.

The case is In Re: Oil spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 2:10-md-2179, U.S. District Court, Eastern District of Louisiana New Orleans).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net; Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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